Car insurance costing £300 more for those paying monthly – how to save
The difference between monthly and annual car insurance premiums has shot up over the last few years.
Pay-monthly drivers paid £217 more in November 2019, and that rose to £302 in November 2022, according to Which?
It studied data shared by GoCompare and found monthly payers were charged £757.60 over the year, compared to £455.49 for annual customers.
Nearly half of GoCompare customers (46%) opted to pay monthly in November 2022, figures suggested.
Younger people often paid monthly, according to GoCompare.
Although not every monthly deal is more expensive than yearly, it is often those who are struggling the most financially who were paying "over the odds" for insurance, Which? said.
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Jenny Ross, Which? money editor, said: "At a time when household budgets are under huge strain, it's concerning that customers who pay monthly for their insurance could be paying far more than those who pay their annual premium upfront.
"Paying using an interest-free credit card could help to spread the cost of annual premiums. Haggling and switching also remain effective ways of bringing down the cost of insurance."
The Association of British Insurers (ABI) also encouraged motorists to compare deals.
It said monthly payments were "similar to taking out a loan" with interest added on top.
A spokesman added: "We would always recommend shopping around to find the best policy that meets your needs, not just based on price. If you're struggling to pay your premium, speak to your insurer who should be able to help."*
How to save on car insurance
Save money with cheap car insurance for your vehicle
Quickly compare 100+ insurers. You could save up to £504.
Car insurance is one of a number of unpredictable yearly bills that can catch some drivers by surprise. While you may be expecting a similar quote to the previous year, car insurance costs can go up depending on whether you’ve had driving convictions, you’ve moved house, local crime has increased, you’ve made a claim, the markets change, and more.
For some, particularly when finances are already stretched, it is not an option to pay for car insurance upfront.
But one way around this could be to put the bill on an interest-free credit card, divide the amount by 12, and make sure you put that amount towards your credit card bill every month.
Erin Yurday, co-founder and CEO of NimbleFins said: “As long as your credit card is interest-free for the whole year, this could be a way to save hundreds of pounds.
“New financial rules came into force in 2022 stopping insurance companies offering new customers a cheaper premium than existing, but there are still deals to be had by comparing providers.
“Speaking to an insurance company and trying to negotiate with them directly can also be successful, particularly if it’s towards the end of the month and they have targets to hit.”
Read our guide on 10 Ways to Save Money on Car Insurance for more tips.
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Save money with cheap car insurance for your vehicle
Quickly compare 100+ insurers. You could save up to £504*.